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Bill Murphy and Chris Powell of
the Gold Anti-Trust Action Committee (GATA) gave www.silberinfo.com
the following exclusive interview:
silberinfo:
Our last interview dates back to
March 2005. Bill and Chris, what has changed in the meantime for GATA and the
work you do?
B. Murphy:
1. We held an international gold
conference on April 18th, 2008 right outside of Washington, D.C.
2. We filed freedom of
information requests to the Fed and US Treasury, asking questions about gold
swap operations. The Fed withheld hundreds of pages of information, redacting
hundreds of pages of others. The Treasury gave a non-response. When we
queried specifically about the Exchange Stabilization Fund, they responded
about the Exchange STABILITY Fund. Is the US Treasury truly an Abbott and
Costello operation?
C. Powell:
More evidence of central bank
intervention in the markets has been disclosed, and opinion in the precious
metals markets increasingly is coming around to acknowledging the intervention.
silberinfo:
What are your thoughts regarding
the present financial crises with respect to gold?
B. Murphy:
It is bad and going to get
worse. On January 31, 2008 GATA placed a full-page color ad in the Wall
Street Journal, which you can read at:
http://www.gata.org/node/wallstreetjournal
Here are three sentences from
our ad: "But to suppress the price of gold is to disable the barometer
of the international financial system so that all markets may be more easily
manipulated. The manipulation has been a primary cause of the catastrophic
excesses in the markets that now threaten the whole world.
"Surreptitious market
manipulation by government is leading the world to disaster."
There was not one press inquiry
as to what GATA knew and what we were talking about. Some day this ad will
receive enormous attention.
C. Powell:
If gold had been allowed to
trade in a free market, it would have warned, via its rising price, of the
excessive credit in the world financial system and the debasement of the
money supply and maybe gold's warnings would have been heeded.
silberinfo:
It is said that at the moment a
lot of gold is demanded and bought. Still the price of gold in USD is
significantly lower than in March, although the crisis has escalated since
then. Is this the case because of continued market manipulations, or are
other reasons playing a role here?
B. Murphy:
I receive reports EVERY day of
gold coin shortages in countries around the world --from Germany, to Argentina, to Canada, to England, all of Asia, etc. Months ago the US Mint announced it was curtailing production of US
gold coins.
Last week the Mexican Central
bank limited sales of its Libertad silver coins. This is no accident. It is
an organized effort to limit demand for gold and silver and keep this kind of
money out of the hands of the people.
C. Powell:
The benchmark price of gold, the
price reported on the commodities exchanges, is low, it is something less
than the true price. It is the price for promises of gold delivered in the
future, promises that might be defaulted upon. The true price is for metal in
hand, and that price is maybe 35-40 percent higher amid worldwide scarcity of
real metal.
silberinfo:
The Washington Agreement on
official gold sales is running out next year. Do you think there will be a
new agreement?
B. Murphy:
With the way the world the
financial market scene is changing, I am not sure central banks want to be
seen squandering what gold they have left. GATA believes they have well less
gold than half the gold they say they have.
My guess is we are going to a
new day when it comes to official sector gold -- mainly because they will be
forced to view gold differently.
C. Powell:
Central banks coordinate their
gold policies -- that's what the gold price suppression scheme has been about
-- and there likely will be continued coordination, though perhaps in a
different direction eventually.
silberinfo:
The worldwide tonnage of mined
gold has been going down consistently in the last years. Do you think that
this trend will go on?
B. Murphy:
There is NO way gold production
will even remain even the same in the years ahead. And the way The Gold
Cartel has forced down the price of late, makes it even less likely
production will increase for MANY years. Substantial production increases are
five years off, or more.
C. Powell:
Yes, production is likely to
keep declining for a while even if the gold price rises substantially soon,
since bringing new mines to production takes years and returning mothballed
mines to production may take many months.
silberinfo:
Because of the financial crisis,
the governments attempt to rescue the financial industry with a lot of money
worldwide. Is this good or bad for the future performance of gold?
B. Murphy:
Short term a deflationary spiral
has been negative for all commodities. However, common sense dictates that so
much new printed money will be extremely inflationary down the road -- when
the staggering new amounts and the velocity of money turnover kicks in. Right
now everyone is hoarding money and conserving cash.
C. Powell:
Insofar as bad debts are
forgiven or made good and the money supply is reflated, this should be good
for gold.
silberinfo:
You are "at the
source"; do you have new information that points to countries that are
considering backing their currencies with gold?
B. Murphy:
Don't know of any.
C. Powell:
No firm evidence of this. But
any countries considering an alternative to the dollar as a reserve currency
will automatically consider incorporating gold in some way.
silberinfo:
The new worldwide trend to
nationalize and to establish public interests in companies is heading to
socialism. Could you imagine that the COMEX could be the next potential
victim?
B. Murphy:
The Comex is a farce and is a
tool used by the US Government. The rules are made for the shorts, the big
banks in this case. Something very dramatic is likely to occur in the future,
like a default of some kind -- as the real world market detaches further from
the Comex prices.
C. Powell:
In my view the Comex already
long has been an agency of the U.S. government, insofar as it is the main mechanism
of suppressing prices with the help of largely unregulated derivatives.
silberinfo:
Looking at the production of the
U.S. Mint in the past, it occurs that they have been producing and selling a
lot more gold coins, as it is the case now. Could it be that the mint holds
back gold on purpose, maybe following an order?
B. Murphy:
As mentioned earlier, there is
no doubt in my mind there is a coordinated effort, not only by the US (it emanated here of course), but all countries to
limit the amount of gold and silver that ends up in the hands of citizens.
C. Powell:
In many years over the last few
decades the U.S. Mint has produced far more coins than it has produced so far
this year, so minting capacity is not the problem. If the U.S. Treasury really
holds the 8,200 tonnes of gold reserves it claims, and if the gold price is
really declining as the futures markets say, obtaining the gold should not be
a problem either. So I have to conclude that gold is actually quite scarce
now and that the U.S. government (and other governments) want to reduce the
public's access to it, lest more money flow out of government currencies and
out of other markets.
silberinfo:
It is reported that a lot of
people in India are reluctant to buy gold right now, because the
price looks very high to them. Is this just a temporary phenomenon in your
opinion?
B. Murphy:
Gold demand in India has been inhibited by a very weak rupee and a weak
stock market. The Indians have been the most significant buyers of gold over
the years and likely to be that way for years to come. They are the major
buyers on significant price breaks like we have now.
C. Powell:
India
is exquisitely sensitive to the gold price and probably knows better than
most when gold is expensive and when it is cheap. But looking ahead some
years, I think gold's price today will be considered a fantastic bargain.
silberinfo:
What do you think about the most
recent developments regarding the opening of the Chinese gold market for private
investors? Will China
become a "Hot Spot" in the future with regards to the gold trade
and the demand for gold?
B. Murphy:
Contrary to the US Government,
it appears the Chinese Government wants to get more gold in the hands of
their people. If they know what we know, then they know the price of gold is
going to soar in the years ahead. The more gold they have in their country,
the better. Gold ownership is no threat to their currency.
C. Powell:
It will depend on whether the
Chinese market becomes a free-trading and largely physical market or a
largely paper market subject to manipulation by those with access to infinite
government money.
silberinfo:
The mining stocks have been
crushed since March. What are the reasons, and do you think that the
markdowns are justified?
B. Murphy:
The collapse in the mining
shares is historic. Most of the gains made from the bottom of 2000 have been
erased over the past few months. It is my opinion gold and silver will be the
go-to investments in 2009 and the run higher in the gold/silver shares will
be unprecedented. Returns of 1,000 percent and more from these current
depressed levels will be common.
C. Powell:
The stock market has been taking
its cues from the Comex rather than the physical market. But if miners can't
learn to get around the Comex and reach the retail market more directly, they
may never make money and their low share prices may be deserved.
silberinfo:
What do you think about the
increasing costs for mining companies and their effects on the realization of
new projects (e.g. NovaGold)? Doesn't this speak for physical gold and
against investments in mining stocks? Would you still suggest to invest in
both?
B. Murphy:
What is ignored for the time
being is how much the drop in the price of oil and other commodities is
benefiting the bottom lines of the gold producers. Right now, nothing matters
in this bloodbath, but it will when the prices of gold and silver begin to
soar again.
C. Powell:
Yes, until the gold price rises
substantially, gold itself will be a better buy than mining companies. But
eventually scarcity will drive the gold price high enough to make mining
profitable again. The key question, as with every other investment, is
exactly when. I wish I knew.
silberinfo:
Since our last interview a lot
has been going on in the hedge books of many gold producers. The majors,
particularly Barrick Gold unwound their forward sales. Does this surprise you?
B. Murphy:
No, their hedging programs were
a disaster. Most of them kicked in with gold right above and below $300 --
put into effect by the bullion banks like Goldman Sachs and Chase Bank to
enhance their gold price suppression scheme. Those still short hedges ought
to be covering as fast as they can on this price dip.
C. Powell:
No. While this year has been
terrible for gold, the gold price is still far above the price at which the
hedges were incurred.
silberinfo:
What do you think of the danger
that mining companies get nationalized in a crisis?
B. Murphy:
That can always happen and
probably when the prices of gold and silver go bonkers, while other market
sectors are struggling and revenue from those sectors dwindles.
C. Powell:
This is always a threat but less
of a threat in jurisdictions where the rule of law is well-established, and
of course a lot of financial companies already have been nationalized to some
extent. Lately it has been far riskier to own banking company shares.
silberinfo:
The collapse of big U.S.
banks has pointed out how dangerous it can be to invest in gold certificates.
Nevertheless this market is still going on very well. What is in your opinion
the reason for the continued popularity of "Paper Gold"? What
conclusions to you take?
B. Murphy:
People are lazy to some degree.
It is so much easier to buy the paper gold. However, as concerns grow about
paper instruments of all kinds, there is likely to be a more dramatic shift
to ownership of the physical. My favorite is James Turk's GoldMoney.com.
C. Powell:
People just don't understand
that the gold may not be there. We'll keep trying to alert them.
silberinfo:
A lot of investors accumulated
big losses because of the share price markdowns. How does the optimal
structure of a portfolio look like in your view? How much gold should one own
as a percentage, and in which form should that be?
B. Murphy:
Most all of my money is in gold,
silver and the shares, so I am prejudiced. Right now the quality gold/silver
shares are the buy of a lifetime. Investors should own as much of both as
they think prudent for their own well-being.
C. Powell:
I'm a paranoid schizophrenic,
not an investment adviser, so my ideal investment portfolio would be 100
percent gold and silver, stored safely on some other planet.
silberinfo:
Many of our readers are besides
gold mainly interested in silver. Why does the price of silver lag behind the
price of gold so significantly these days? Is the potential for silver
exhausted already, as many analysts have written recently? They wrote, that
silver will be demanded less in an economic downturn, but is produced more as
a byproduct of the increased copper and zinc production.
B. Murphy:
The silver price slide was
orchestrated (public knowledge) by two large banks. It is totally
manipulated. That said, the shorts have to be acquiring physical silver some
place -- probably the ETFs, in order to supply it to the physical
market. Meanwhile, the premiums on silver coins, IF you can find them,
have gone through the roof.
C. Powell:
There's evidence from the Comex
that silver is even more manipulated than gold, insofar as the short position
is more concentrated. Since silver is produced largely as a byproduct of
other mining, declining production of related metals is likely to reduce
silver production, increasing scarcity ... and price.
silberinfo:
The premium on the spot price of
physical silver in Europe has reached more than 50% in Europe.
What could be the reasons for this development?
B. Murphy:
As mentioned above, there is an
organized effort to curtail gold and silver supply, in the form of coins and
bars, from getting into the hands of ordinary citizens.
C. Powell:
The Comex price is not real --
that's all.
silberinfo:
Considering loss of trust into
the financial system and the connected worldwide run for gold, do you think
that the possession of physical gold will be banned again?
B. Murphy:
Instead of banning gold
ownership, they are making it less available, hence the extraordinary
premiums. I can't imagine the US
banning gold ownership. So few Americans own it. People would say,
"HUH?" The rest of the world would then laugh at us and buy all
they could. That would be the death knell of the dollar.
C. Powell:
Maybe in some countries but not
in all. Since gold is not a major part of any country's monetary stock
anymore, there's not much rationale for any country to outlaw its private
possession.
silberinfo:
For several thousands of years
gold has been in the hands of governments and religious aggregations, that
controlled the price in one way or the other. Admittedly in this time gold
usually was equal to money; still a critic could say that GATA is just a
group of old people that are interested in a higher gold price for personal
reasons and that forgot about the welfare of the other nations. Why exactly
does GATA advocate a really free gold market without direct or indirect
interventions from governments or central banks?
B. Murphy:
Who’s old? Not too old to
remember GATA initially gained a great deal of attention in 2000 by focusing
on the idle miners in South
Africa, who were unemployed because of the
gold price suppression scheme. Each miner supports 10 to 12 others in his
family. Presidents Bush and Clinton are the worst of hypocrites when they
mouth off about their caring for the AIDS/severe economic problems in
southern Africa. Had they let the price of
gold trade freely, SA would be in BOOM TIMES now and there would have been a
lot more money to address the very serious problems.
C. Powell:
The private possession of gold
and a free market in gold are simply essential to individual liberty and
limited government. GATA doesn't worship the golden calf; that's idolatry. We
seek to defend liberty and restrain government.
silberinfo:
Bill and Chris, thank you very
much for your time and this interview. We wish you and GATA all the best for
your future.
Bill and Chris: Thank you.
© by
silberinfo
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